The only thing not losing value right now

The advance of technology is making everything cheaper – except land. In fact, the more technologically advanced we become, the more valuable land gets. It’s the only safe bet left.

Almost everything is becoming cheaper.

Maybe not in dollar terms. In a nominal sense, the price of things is generally increasing. We’ve got inflation that keeps the arbitrary numbers we attach to prices creeping upwards.

But the real cost – the relative price of most things – is decreasing.

Take an i-phone for example. 15 to 20 years ago, the technology embedded in current i-phones possibly existed, but to access it, you would have had to pay a pretty penny. In terms of your labour hours, maybe it would have taken you a year?

Now, how many labour hours does it take? Maybe a week? Maybe less.

We often fail to realise how cheap things are becoming because there are so many improvements built into newer models. Computers don’t seem to be getting any cheaper, but the computing power of 10 years ago is already way past obsolete these days.

And it’s not just high-tech stuff. I bought a heater 6 or 7 years ago, and it finally gave up the ghost. So I went looking around – you can buy a cheap fan heater for less than 15 bucks these days!

Sure, maybe it’s crap but still. You can get a functioning heater for less than an hours work on the minimum wage.

Don’t you feel rich?

And its true of bread, crisps, chocolate… almost any thing you can think of. In terms of how long it takes to earn the equivalent of these things, almost everything is getting cheaper.

Why?

Basically humans are just getting smarter and more organised. We’ve had a number of major production revolutions in the past 200 years that have radically expanded our access to the stuff of life.

There was the industrial revolution, the production-line revolution, the digital revolution. And some folks are saying we’re on the cusp of a robot and automation revolution that’s going to take it to a whole other level.

Each revolution has made us more efficient at producing things – lots of things. It takes less labour to make each new item, and as a result, the cost of the thing, relative to labour, falls.

As a result, I live in a consumerist paradise that my grandfather could never have dreamed of.

And if you hold quality constant, everything I want is getting cheaper and cheaper.

But there are two major exceptions to this.

Energy and property.

While the price of pretty much everything else is in free-fall, the price of energy (which is really the commodities of oil and coal) and property (specifically land) are on the rise.

Why is that?

Well, the reason is that our technological revolutions couldn’t touch them. All the computing power in the world, even the most sophisticated robots imaginable, just can’t make more land.

These things are fixed (though a potential solar revolution might create an abundance of energy at some point).

And so even though we live in the ICT age, the thing that’s appreciating most in value is still land.

At the same time, consumption has long since departed from basic needs. Even for the least well-off in Australian society, consumption decisions are heavily influenced by status, branding, and self-image.

For most of the things we buy and that shape our sense of who we are, prices are falling. Technological progress has created an abundance. But one of the biggest defining consumption purchases is still our address. We want to live in a neighbourhood we like, in a community we connect with, with a geography that’s pleasing to us.

But again, these things are in fixed supply, so you see serious competition in the urban context for premium addresses. This competition feeds directly into price.

And so this sets us up for a future where technology continues to drive the price of almost everything towards zero – but land stands out as the exception to the rule, as prices keep surging higher and higher.

In fact, the wealthier we become in terms of purchasing power, the more we have to spend on our address.

In 50 years, the share of income devoted to housing expenses has barely changed. The share spent on food however has fallen sharply.

The question you want to keep in mind though, is which side of the fence do you want to end up on.

If you plan on continuing to sell you labour to the market, more globally fluid production centres will put downward pressure on you wages (can someone in developing Asia do your job?), and a robotic revolution might even make your job obsolete.
(3D printers in China can “print” a house in less than a day!)

The banks and the mega rich are already on to it. Try pitch a new business idea to a bank and see how far you get. But pitch the idea of buying a basic property somewhere, and you can leverage 50 grand into half a mil.

Try and use a stake in a business as equity and you’ll get laughed out of the office. Your parents home as collateral? No worries.

With the prospect of a solar revolution on the horizon, land is the only thing that is guaranteed to hold on to its value over the longer term. Even a dot-com company like Facebook needs an office somewhere. And we all need somewhere to live.

We are intrinsically connected to the earth, and all the value in the world derives and depends on it.

Enjoy reading your emails
Agree with the 3D printing or micro manufacturing stage that no doubt it’s coming at a faster pace that we dream off, although in the past industrial revolutions , the work for mankind increased and not decreased , with the new social revolution that we are barely touching the surface , we will have a re adjustment phase / let’s call it consolidation stage , and until we shift and redistribute the work from the current “world factory” China we will still see poor economic performance that will affect us all. Back to your comments the human value will increase and not decrease, and don’t agree that land/ property will increase and everything else will decrease , property that sold in Spain for 500kEuros now being sold for 250k Euros , which takes us back to the old Supply/Demand equation .
Europe already has started “manufactured in Europe” and increasing taxes /tariffs on cheap Chinese imports , which until each country stops playing politics and start investing on their human capital , the land will have little value as no one can afford to buy it. look at Portugal with loans at 2-3% no one is buying , the land /property values are decreasing daily .
In Australia once we loose mining to the Bric economies , and all manufacturing is offshore lets see if your comments are valid .
Jorge
H 4 Living

true,from a present/near future economic point of view.ultimately,in the long run,lands ownership could only go up in value and become harder to acquires as the population keeps on increasing…
as its been ever since the birth of mankind.its only a matter of time!

Well positioned ,flood free land, within close proximity to facilities
and infastructure will be the ultimate winner. Have added 100 acres within 3 km. from a large rural city centre as my choice of superannuation.Agreed that land is the ultimate winner. Peter

Property always goes up over time. I read years ago that land in England has gone up on average 10% a year, over the last 900 years- a long term result.
Temporary falls in property prices will happen in the sort term after an economic crash which the debt spiral and property speculation has caused in Europe. The 20 or more years of economic stagnation after the property price bubble of the 1990s in Japan is another example of stable or falling land prices BUT consider the current land price in Japan compared to 30, 40 ,70 ,100, 300 years ago. Property always goes up!
Rothchild the Jewish German banker said the best time to buy land was when there was blood in the streets.-(providing it was not your blood or all your family being murdered) His family set up some of the biggest banks in the world, then financed both sides in WWI and WWII etc.
The tiny areas of land made by land fill in UAE, Japan, Singapore etc hardly prove Jon’s comments wrong.

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